Updated: July 29, 2019

Mis-Sold Pension Transfers

Have you been missold a pension transfer in the past? Read our guide to find out what to do about it

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: July 29, 2019

A great number of people in the UK have unfortunately been a victim of a mis-sold pension transfer, which could put them through financial hardships when it comes to retirement. However, if you have been mis-sold a pension transfer, you may be able to claim compensation.

In this article, we look at what counts as a mis-sold pension, how to spot if you’ve been a victim, and how to go about making a claim.

What are mis-sold pension transfers?

A mis-sold pension is where a new pension plan is deliberately mis-represented to you by an advisor, or where you are misled about the suitability of this new pension. You may have been encouraged to transfer out of your original pension scheme into a less-suitable one, for example, a pension scheme with high-risk investments and/or hidden fees.

Some types of mis-sold pensions include:

SIPPs
Small self-administered scheme (SSAS)
Defined benefit transfer

You may have been mis-sold a pension if you transferred your original pension funds into a SIPP. They can potentially produce higher returns on your investments, however, they are typically more suited to seasoned investors who are looking to take more risks for potentially bigger rewards. Because of the risks, it’s not usually advisable to transfer all your pension savings into one.

small self-administered pension scheme (SSAS) is a type of workplace pension which is typically established by company directors for themselves and other key members of staff, though they can open the scheme to their employees.

SSAS schemes are flexible as you can choose how your money is invested, and you could even invest in the company you own or work for. However, this adds risk to the performance and longevity of your pension, so if an advisor encouraged you to transfer your original pension into a SSAS and didn’t make the risks clear to you, you may be entitled to make a claim.

defined benefit (DB) pension transfer (also known as a final salary transfer) is when you choose to transfer out of your salary-related pension in exchange for a cash value, which you then must invest in a defined contribution (DC) scheme such as a personal pension, stakeholder pension, another employee pension scheme, or a SIPP. You’ll also lose your DB’s scheme benefits.

Unfortunately, if you transfer out of your salary-related pension scheme, you’ll likely be worse off. If you were mis-sold a defined benefit transfer, you may not have been aware of any costs, risks and loss of benefits involved.

For example, you could have signed up to ongoing advisor fees without your knowledge, or you may have been persuaded to transfer your pension into a high-risk investment fund with high management fees.

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How do you know if you’ve been mis-sold a pension transfer?

Financial advisors are obliged to recommend a variety of options to make sure you’re fully informed to make the right decision. If you suspect that the financial advisor you previously worked with mis-sold you a pension, then you may be in a position to make a claim.

See below for examples on which you could build a case:

  • The contact was initiated through a cold call –
    Someone offering you a fantastic opportunity from ‘out of the blue’ is usually a red flag.
  • The advisor didn’t look into your circumstances before making the recommendation –
    If the advisor didn’t find out if the investment was actually suitable for you before making a recommendation, it’s safe to say you were likely mis-sold.
  • If you were advised to transfer out of your direct benefit/workplace pension –
    This is especially true if you had no plans to leave the company at the time. At this point, you don’t need to worry about whether you have all the paperwork, or the specific details around your case.
  • The terms and conditions weren’t explained to you –
    If the small print wasn’t explained to you, this could be a red flag. The advisor should have highlighted the important parts and informed you if anything important was missing.
  • The advisor wasn’t as experienced as they said they were –
    If an advisor exaggerated the number of years they’ve been practicing or the number of qualifications they hold, you may be able to put in a claim for a mis-sold pension.
  • You weren’t clear about the fees and charges –
    Transferring one pension to another can carry extra charges, and sometimes these charges can outweigh the amount you were promised you could save by switching, or even cost you more.
  • The pension or investment was riskier than you wanted –
    If the advisor you worked with actively encouraged you to switch to a pension plan that didn’t meet your attitude towards risk, then you may be able to make a claim.
  • Transfers from your workplace or personal pension into an unregulated collective investment scheme (UCIS) –
    This is legal, however, this transfer is often advised against due to the high-risk nature of these schemes and the potential benefits lost from your original pension. Examples would be investing in Car Parking places, hotel rooms, storage units, holiday homes. In fact anything not regulated by the Financial Conduct Authority (FCA)
  • Transfers into tax-avoidance schemes –
    This is illegal and very often a blatant scam.

If you identify with one, some, or all of these scenarios above, a fully qualified and regulated financial expert could help you make a claim and recommend your next best course of action. See below for information on how to make a claim, or get in touch to speak to one of the independent pension experts we work with.

How to make a claim

If you believe that you’ve been mis-sold a pension or received unreliable advice from an advisor, you may be eligible to make a claim. You can do this in two ways: by yourself, or with a financial advisor who is fully regulated by the Financial Conduct Authority (FCA). Below, we take a look at how you can do both.

DIY route
With a specialist

You can make a free claim through a scheme such as the Financial Services Compensation Scheme or the Financial Ombudsman Service (FOS), however, this could involve a lot of paperwork and running around on your part. While you don’t have to work with a specialist financial advisor to put in a claim for a mis-sold pension, the benefits of working with a specialist outweigh making a claim by yourself.

Expert financial advisors, like those we work with, have considerable experience and expertise in securing compensation for people who have been mis-sold a pension transfer. A financial advisor can do all the running around for you, and they increase your likelihood of success due to their expertise.

While a financial advisor will take a fee, many operate on a ‘no win, no fee’ basis, so if your claim is unsuccessful, you won’t pay a penny.

Are claims time-sensitive?

Yes, there is a limit of six years from the time you were sold the product, or from three years when you noticed or suspected that something was wrong. So, if you suspect that something has gone amiss with your pension transfer, it’s best to act sooner rather than later.

Speak to an expert

An advisor may have let you down in the past, however, we only work with the best financial advisors in the business to give you peace of mind. We hand-pick each advisor and train them to meet our in-house criteria so that we are fully confident to match you with them.

Call us on 0808 189 0463 or make an enquiry and we’ll put you in touch with someone shortly for a free, no-obligation chat about your potential mis-sold pension transfer.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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